Federal Reserve Releases New Guidelines For Crypto Banks

Until now, US financial institutions looking to offer both crypto and traditional banking services have been forced to make a choice. It is quite possible that that will change soon. The Federal Reserve has published formal guidelines in which it is possible for crypto parties to function as a bank at the same time.

Why is that important?

Parties such as Celsius and BlockFi, the American crypto lending platforms that you may know from the bankruptcy stories, do not qualify as banks under the law. This means, among other things, that customers of these parties do not enjoy the same protection as customers of a traditional bank. If a traditional bank fails, the US government guarantees a certain amount. That amount is a kind of insurance for the customers of the bank in question.

In the case of Celsius and BlockFi, customers currently get nothing, should they actually fall over. Incidentally, this news does not mean that a Celsius or BlockFi can just be given the status of a bank in the United States. There are strict requirements that are probably not in line with the current way of working of, for example, Celsius. They have taken risks that are not possible for a normal bank.

Federal Reserve is having a hard time

It normally takes 5 to 7 days for a party to receive a response from the Federal Reserve to a request for a banking license. However, the major American crypto exchange Kraken has been waiting for years for a response from the Federal Reserve. They are part of a list of crypto companies that have been eligible for a banking license since 2020 based on a new law in Wyoming. However, the Federal Reserve has a hard time judging parties like Kraken.

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The new guidelines should now provide a solution. “The new guidelines provide a consistent and transparent process to evaluate requests for banking licenses with the Federal Reserve and access to payment services to support a secure, inclusive and innovative payment system,” said Lael Brainard, Federal Reserve vice chairman. This isn’t the most scintillating news, but it’s a good development for confidence in the crypto industry.

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